Airlines have returned to profit and are forecasting that booming demand will push earnings even higher over the next year, in a striking turnround for one of the industries worst hit by the pandemic.
The world’s largest airlines reported $6.3bn in net profit in 2022, a striking reversal from a combined $40bn in losses over the previous two years, according to a Financial Times analysis of FactSet and Capital IQ data.
The figures cover eight of the 10 largest airlines by passenger numbers but exclude Chinese groups, which were still subject to travel restrictions in 2022.
Sales in 2022 surpassed pre-pandemic levels, driven in particular by strong growth from Turkish Airlines and Indian carrier Indigo.
People have flocked back to air travel as restrictions have ended over the past year, most recently in China, and there are few signs that worries about the economy will hold back demand in the coming months.
Lufthansa on Friday became the latest airline to report an annual profit and strong demand for travel despite weaknesses in the global economy. “In just one year, we have achieved an unprecedented financial turnround,” said chief executive Carsten Spohr.
The German flag carrier reported an operating profit of €1.5bn for 2022, up from a €1.7bn loss the previous year. Both revenues and passenger numbers roughly doubled.
The airline said it expected “a significant improvement” in profitability this year as “demand for air travel remains high”.
The results came on the same day that Australian airline Qantas said it expected to hire 8,500 people over the next decade to rebuild its workforce, having cut staffing significantly at the height of the pandemic.
Air France-KLM and British Airways owner IAG have also reported a return to profit in recent weeks, and predicted that the recovery will continue.
In Europe, many low-cost airlines plan to fly more passengers this summer than in 2019. Ryanair, the region’s largest airline, has forecast a higher profit for its financial year ending in March than in 2019.
“This is not a one or two or three-quarter wonder . . . I would be optimistic the industry can get back to 2019 profitability levels,” said Stephen Furlong, a European airlines analyst at Davy.
Global air traffic reached 91 per cent of 2019 levels this month, according to data provider Cirium.
The recovery in the US was faster than in Europe, with some airlines returning to profit in 2021 thanks to a large domestic market, few travel restrictions and generous subsidies from the US government.
Airlines have yet to fully rebuild their pre-pandemic flight schedules, with the industry facing constraints including shortages of new planes and staff. This has kept profits well below 2019 levels in most cases — two-thirds down for IAG, for example — but also contributed to higher ticket prices because of limited supply in the face of booming demand.
“The supply and demand dynamics are different than they’ve ever been in my career,” United Airlines chief executive Scott Kirby said.
In the longer run, analysts said a full return to pre-pandemic profitability relied on increasing capacity.
“Some have already recovered dramatically more than others; it is partly a function of how quickly you can get back your 2019 capacity,” said Furlong.
Some airlines must also contend with the slow return of demand in parts of Asia-Pacific, complicated by expensive diversions because of the closure of Russian airspace, plus questions over how fully business travel will recover.
IAG chief executive Luis Gallego said the business would still take “a few years” to hit pre-pandemic profitability, absent a new macroeconomic shock.
Additional reporting by Claire Bushey in Chicago, Nic Fildes in Sydney and Maxine Kelly in London